Lifetime ISA launch date confirmed
The new Lifetime ISA will be launched from April 2017. The Lifetime ISA is designed to help those aged between 18 and 40 to save for a new home or for their retirement. The launch of the scheme was confirmed when the Savings Bill was enacted on 16 January 2017.
The new scheme will see the government provide a bonus of 25% on yearly savings of up to £4,000 until the saver’s 50th birthday. Any savings invested before the Lifetime ISA holder’s 50th Birthday will benefit from the 25% bonus. This could mean an extra £1,000 for every £4,000 saved annually from the age of 18 to 50. In total this could see savers who invest the maximum contributions of £128,000 receive a maximum government bonus of £32,000.
The savings and bonus can be used to purchase a first home worth up to £450,000 anywhere in the UK or to save towards retirement. Savers will be able to withdraw the savings tax-free after their 60th birthday. The funds can remain invested after age 60 and any interest and investment growth will be tax-free. The money can be withdrawn earlier (for something other than the purchase of a first home) but the government bonus will be lost and a 5% penalty will be levied.
Any contributions to a Lifetime ISA will be part of the overall ISA annual contribution limit. This limit will increase to £20,000 from April 2017. The government bonus will be paid annually at the end of the tax year.
Jane Ellison, Financial Secretary to the Treasury, said:
‘From April, the Lifetime ISA will help hundreds of thousands of first-time buyers aiming to get onto the property ladder every year and encourage them to save for later in life. It will be closely followed by Help to Save in 2018 which will help lower paid working people to put money aside each month to save what they can for a rainy day and receive a generous top up from the government.’